INTERVIEW

“Today’s fiscal crisis is more acute than in 1991”

Posted: Monday, Feb 25, 2002 at 0000 hrs IST
Updated: Monday, Feb 25, 2002 at 0000 hrs IST

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: When finance minister Yashwant Sinha was still earning his spurs in the Union finance ministry, preparing his first budget in 1991 as a member of the short-lived Chandrashekhar government, one of his key aides was the then chief economic advisor Deepak Nayyar. At present Vice-Chancellor of the University of Delhi, Dr Nayyar is a distinguished economist who began his career as an IAS officer and then went on to earn a doctoral degree in economics from Oxford University, UK. After a long stint in academia, having taught at Sussex University, IIM-Kolkata and Jawaharlal Nehru University, Dr Nayyar joined the government as economic advisor in the Union commerce ministry and was later chief economic advisor in the finance ministry. Dr Nayyar quit the ministry in 1991 due to policy differences with Dr Manmohan Singh and returned to teaching. On the eve of Mr Sinha’s fifth budget, Dr Nayyar recalls the handling of the crisis of 1990-91 and how Mr Sinha could well have been the “hero of 1991” if he was only allowed to present his budget that year.
However, the fiscal situation today is in many ways less sustainable and more crisis-prone than was the case in the early 1990s, notwithstanding the accumulation of foreign exchange reserves, warns Dr Nayyar in a conversation over the weekend with Sanjaya Baru of The Financial Express. Excerpts from the interview:

You were the chief economic advisor in 1990-91 when Mr Yashwant Sinha prepared his first budget, which he couldn’t then present. From your recollection of that time what impressions do you have of Mr Sinha as a finance minister and how different would his February 1991 budget have been from the July 1991 budget of Dr Manmohan Singh?
I worked in the ministry of finance under three different finance ministers and three different Prime Ministers, between 1989 and 1992, and if we focus only on February-July 1991 we wouldn’t be properly contextualising what happened. The fiscal crisis, the balance of payments crisis, had been building over a period of time and what Mr Sinha did or could not have done should not be viewed in isolation. It was a difficult and an unusual conjecture - politically and economically - and the degrees of freedom were few and yet, given the fetters and constraints on the government at the time, the management of the economy during that crisis was as good as it could have been, as...

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